09:20 AM EDT, 09/18/2024 (MT Newswires) -- Oil prices weakened early on Wednesday after a report showed an unexpected rise in U.S. oil inventories, putting the focus back on weak demand following two days of gains that came on supply worries and rising Middle East tensions.

West Texas Intermediate crude for October delivery was last seen down US$0.53 to US$70.66 per barrel, while November Brent crude, the global benchmark, was down US$0.55 to US$73.15.

In its weekly survey released Tuesday, the American Petroleum Institute reported U.S. oil inventories rose by 1.96 million barrels last week, while the consensus estimate among analysts polled by Reuters had been for a 0.5-million barrel drop. Gasoline and distillate inventories also rose, by 2.34 million and 2.3 million barrels respectively.

The Energy Information Administration will release official inventory data later on Wednesday morning.

"Crude traded softer after a weekly build in US crude and fuel stocks, reported by the API, helped offset sustained tensions in the Middle East," Saxo Bank noted.

Geopolitical risk ratcheted higher on Tuesday after pagers used by Lebanon's Hezbollah militia simultaneously exploded, killing some and causing thousands of injuries. No one has claimed responsibility for the incident, though Israel is widely considered to be behind the attack as it and Hezbollah trade missile attacks across Israel's border with Lebanon.

"The Middle East will never leave us alone and the latest audacious and outrageous event is something only imagined in sci-fi and James Bond movies," PVM Oil Associates wrote.

Supply concerns remain as Libya's exports are cut amid a power struggle between its two competing governments. However, Gulf of Mexico production has mostly recovered as platforms restart output following Hurricane Francine, with the U.S. offshore regulator on Tuesday reporting just 0.1 million barrels per day remained offline, down from nearly 0.8 million last week.

Markets will also be watching the Federal Reserve amid expectations the central bank will begin a cycle of interest-rate cuts at the end of the two-day meeting of its policy committee at 2:00 p.m. Eastern time. A cut of 50 basis points is widely expected, but the Federal Open Market Committee could opt for a 25-basis-point cut, with further reductions coming at the group's November and December meetings.